Thursday, November 01, 2012

Back on June 13 of this year, I posted the blog, also reproduced below, titled "If Communications Policy Were A Campaign Issue." As I suspected, my prediction in the first line that communications policy reform would not likely be a hot campaign issue surely proved correct.

This is not surprising, given what I called the "macro" issues facing the nation.

Nevertheless, as I explained in June, reforming communications law and policy is an important topic – important enough to the health of the nation's economy and our social well-being that resolution of the issues should not be left solely to the inside-the-beltway "experts" and interest groups. An informed public ought to be engaged as well.

When I re-read the June blog yesterday, I found that what I said then concerning reform proposals still reflects my views. Indeed, I have become even more convinced of the need for real reform that gets rid of outdated and unnecessarily costly regulations that still reflect an embedded analog-era monopoly mindset that is no longer appropriate. In fact, such a mindset, with its pro-regulatory default, is positively harmful in that it impedes the transition to all-IP high-bandwidth digital networks that should be completed as soon as possible.

So, on the theory – or perhaps the hope – that a few days before the election, readers may be ready to think about communications policy reform as if it were a campaign issue, if only to gain a respite from the incessant campaign ads, here's some reform stuff to chew on.

If Communications Policy Were A Campaign Issue

It is not likely that communications policy reform will be a hot campaign issue during this election cycle. After all, spurring job creation and investment, growing the economy, increasing productivity, and reducing the nation's debt and deficit are likely to be the "macro" topics that dominate the campaigns – and well they should be.

You probably won't find the candidates, whether President Obama or Mitt Romney, or candidates for Senate and House seats, arguing about how to address the spectrum crunch, or implement reform of the universal service fund, or eliminate outdated video rules, or resolve the decade-old "special access" proceeding.

I get this. I am not suggesting that these often seemingly esoteric communications policy issues should become standard run-of-the-mill campaign fodder.

But I do want to suggest that, with the communications, information, and entertainment market sectors comprising fully one-sixth of the nation's economy, communications policy matters. More pointedly, the right communications policies can spur job creation and investment, help grow the economy, and increase productivity. The wrong policies can have the opposite effect.

What I want to do here is just offer some reformist positions – you might even say "talking points" – that would be worthy of consideration and debate if candidates were trying to integrate communications policy reform into a broader discussion concerning an overall program for spurring economic growth and new investment. Even if they are not campaign issues, these proposals should be on the table for consideration as policymakers contemplate communications policy reform.

In my view, each of these proposals, if adopted, would be a net positive for the economy, certainly on a long-term basis, even if not necessarily on a "next quarter" basis.

1. Congress should adopt a new Digital Age Communications Act which eliminates the current regulatory "stovepipes" grounded in no longer relevant techno-functional characteristics, and the new statute should replace the public interest standard with an antitrust-like competition standard that places consumer welfare, not competitor welfare, at the forefront.

Rationale: We need a new communications law that does not regulate services differentially based on the technologies employed and which requires a convincing showing of market failure and consumer harm before regulating. The Digital Age Communications Act introduced in the Senate in December 2005 by Sen. Jim DeMint remains a good model for a market-oriented statutory framework that would reduce unnecessary regulation.

2. Eliminate the current dual review of communications mergers and acquisitions by the Department of Justice/Federal Trade Commission on the one hand, and the FCC on the other, so that the antitrust authorities assess the competitive impacts of the transactions, and the FCC assesses whether, if the transaction is approved, the parties will be in compliance with all existing laws and regulations.

Rationale: Now, in an era of large budget deficits, there is substantial overlap in the work done by the antitrust authorities and the FCC, with the duplication leading to unnecessary expenditure of substantial government and private sector resources and delays in the review process. And FCC transaction reviews under the vague public interest standard invite arbitrary and unpredictable agency decisionmaking, along with the now standard bargaining over so-called "voluntary" concessions that epitomizes "regulation by condition." I first wrote about this in 2000 in a piece titled, "Any Volunteers?" The current process discourages companies from engaging in transactions that may increase efficiency and productivity.

3. Develop a national policy framework that makes it more difficult for localities and states to slow down the build-out of wireless infrastructure necessary to accommodate surging consumer demand.

Rationale: There are various measures that must be taken to address the spectrum crunch, such as allowing the secondary spectrum market to function more freely. But one helpful measure would be the development of some form of national policy that has the effect of accelerating local and state processes for siting towers and issuing permits for new infrastructure build-outs. Capital investment would flow more quickly than at present.

4. Accelerate meaningful reform of the universal service subsidy regime and transition, over time, to a more limited program primarily directed to providing subsidy support to eligible low-income persons, not to high-cost communications providers.

Rationale: Until the FCC's high-cost universal service subsidy fund is further reformed, and as the FCC gets bogged down in interminable proceedings developing new "high cost" models and considering waivers from its newly adopted rules, wasteful disbursements of subsidies supporting inefficient telephone providers will continue. This discourages investment in new, more efficient telecom network infrastructure. Absent further reform and resolve, the USF subsidy program is a "telecom Solyndra" waiting to happen. Consider this example: In a recent meeting between the Secretary of Agriculture and the Administrator of the Rural Utilities Service and the FCC Chairman, the Secretary suggested the standard for relief from a reduction of subsidies to rural telephone companies "should be tied to a default on an obligation to government, not to loss of voice service." In other words, regardless of whether continued subsidies are necessary to fulfill their intended purpose of making available communications services, subsidies should continue to flow to keep government loans from going bad. This ill-conceived Solyndra-like policy would be bad for consumers who must pay for the subsidies through USF surcharges on their telephone bills, and who, by the way, are taxpayers too.

Rationale: These various regulations were put in place in the analog-era during a time when the video marketplace still retained some monopoly characteristics. In today's digital broadband video marketplace, competition among various video providers using cable, satellite, fiber, telephone, wireless, and Internet platforms is fierce, so the regulations are no longer necessary. And with the government dictating categories of programming that must be carried and under what terms, and the amount of communications capacity that must be set-aside by providers for use by others, the regulations not only discourage investment, they offend free speech principles to boot.

6. Sunset all FCC rules every seven years, subject to retention if the agency makes a showing of a compelling justification for keeping the regulation.

Rationale: Historically, the FCC, often by its own admission, has been notably slow in eliminating regulations from its books that no longer serve any purpose. Now, even the Obama Administration, through its Executive Order, is urging agencies to engage in retrospective reviews to get rid of, or relax, outdated regulatory requirements. The periodic regulatory review provisions in the Telecom Act of 1996 did not accomplish the stated purpose of eliminating outdated regulations. With marketplace changes continuing at a rapid pace, driven by the development of new technologies, a large number of FCC regulations, however well-intentioned, become obsolete over time. Therefore, all agency regulations should "sunset" seven years after adoption, unless the FCC, after providing an opportunity for public notice and comment, finds there is a compelling justification for retaining the rule.

I know there are other good proposals that could be offered as well, and I certainly know that readers will not agree with all of these.